Government to offer tax breaks to landlords for longer leases - wont be much

LotharIngum

https://www.independent.ie/business/personal-finance/property-mortgages/tax-break-proposed-for-landlords-to-encourage-longer-leases-and-tackle-housing-crisis-37280238.html

So the government are offering tax breaks if you do a long lease.

My guess is that it will have these problems.


Tiny pittance of a tax break. Not even worth it.

Too much red tape, inspections and hassle to even get the tax break.

One sided long lease for the landlord and nothing stopping the tenant breaking it.

And then more legislation changes to move the goal posts all the time.

If you removed all of the tax (zero tax on rental income), removed grandfathered rent controls, let me evict non paying tenants straight away, got rid of the RTB, and allowed me to be able to sell when I want to and rent to who I want to, then maybe.

Otherwise the risk/reward is just not attractive to landlords.

The government have made a total mess and they will just keep making it worse.

Selik

LotharIngum wrote: »

https://www.independent.ie/business/personal-finance/property-mortgages/tax-break-proposed-for-landlords-to-encourage-longer-leases-and-tackle-housing-crisis-37280238.html
Tiny pittance of a tax break. Not even worth it.

How do you know it's a pittance?

Brian201888

LotharIngum wrote: »

https://www.independent.ie/business/personal-finance/property-mortgages/tax-break-proposed-for-landlords-to-encourage-longer-leases-and-tackle-housing-crisis-37280238.html

So the government are offering tax breaks if you do a long lease.

My guess is that it will have these problems.


Tiny pittance of a tax break. Not even worth it.

Too much red tape, inspections and hassle to even get the tax break.

One sided long lease for the landlord and nothing stopping the tenant breaking it.

And then more legislation changes to move the goal posts all the time.

If you removed all of the tax (zero tax on rental income), removed grandfathered rent controls, let me evict non paying tenants straight away, got rid of the RTB, and allowed me to be able to sell when I want to and rent to who I want to, then maybe.

Otherwise the risk/reward is just not attractive to landlords.

The government have made a total mess and they will just keep making it worse.

Why should you get a tax free income?

Amirani

Rental income should absolutely not be made tax free, that would be a massively unfair tax break. Why is income earned from property investment more deserving of tax free status than income earned from labour or from other investments?

The Student

Landlords are leaving the sector because of the tax charges and the anti landlord stances the govt have taken. Prsonallt I would not trust the govt as they will change position whenever it suits them. I think this maybe a little to late for a lot of landlords. The number of ex rentals going onto the sales market is quite high.

LotharIngum

I don't even want a tax break tbh.
Just making the point that the government have driven me out. And even zero tax on rental income wouldn't be enough to get me back in.
Too much moving of goal posts and screwing property owners at every turn. I don't see that changing.


And its not just landlords who should be sore at what Simon Coveny started, and then was continued by our current minister for idiocracy.
Its people who are renting too who are suffering.

Sleeper12

Amirani wrote:

Rental income should absolutely not be made tax free, that would be a massively unfair tax break. Why is income earned from property investment more deserving of tax free status than income earned from labour or from other investments?

I don't think there is any suggestion of making rental income tax free. There is a huge imbalance where large landlords pay very little it tax on rental income and the small guy pays too much. This is a way to help balance things but only for landlords willing to offer long term lease.

Amirani

Sleeper12 wrote: »

I don't think there is any suggestion of making rental income tax free. There is a huge imbalance where large landlords pay very little it tax on rental income and the small guy pays too much. This is a way to help balance things but only for landlords willing to offer long term lease.

It's what the OP suggested, not Government. It was them I was responding to.

Sleeper12

Amirani wrote:

It's what the OP suggested, not Government. It was them I was responding to.

Sorry. I did not read it correctly. My fault

LotharIngum

Amirani wrote: »

It's what the OP suggested, not Government. It was them I was responding to.

What I said was that even if it was 100% tax free, its not enough to repair the damage they have done.

I would expect it to be a pittance and to come with so much red tape that it would make the situation even worse than it is now.


Not once ever has government meddling actually helped the situation.
Each time they interfere they make it worse. They know nothing else.

Browney7

LotharIngum wrote: »

What I said was that even if it was 100% tax free, its not enough to repair the damage they have done.

I would expect it to be a pittance and to come with so much red tape that it would make the situation even worse than it is now.


Not once ever has government meddling actually helped the situation.
Each time they interfere they make it worse. They know nothing else.

Yeah government has done nothing at all that's benefited property capital values at all at all. The large capital gains people who bought in the last five years are sitting on just fell from the sky (which will be CGT free too)

The Student

Browney7 wrote: »

Yeah government has done nothing at all that's benefited property capital values at all at all. The large capital gains people who bought in the last five years are sitting on just fell from the sky (which will be CGT free too)

The govt needed people to purchase property to get cash moving in the economy. They did not offer incentives to benefit the landlord. It was done for the govts own reason.

The_Conductor

Browney7 wrote: »

Yeah government has done nothing at all that's benefited property capital values at all at all. The large capital gains people who bought in the last five years are sitting on just fell from the sky (which will be CGT free too)

Most landlords were trying to run letting residential properties as a business- not relying on the vagaries of capital appreciation- and trying to suggest that a landlord should be happy that his or her property has gained in value over the past 5 years- when few small scale landlords have purchased property since 2008- is a bit disingenuous. In fact- according to the IAVI, who should know what they're talking about, over half of all property on the market in West Dublin, in Renmore and the city centre in Galway- and in the Mayfair area of Cork- are ex-rental properties that landlords are desperately trying to sell. They aren't selling because they want to lock in the price property currently attains- they are selling because the regulatory regime has become so toxic that its impossible to run letting residential property as a viable business.

We discussed all of this when this years RTB report came out- and how they were running out of methods to massage the number of landlords and the absolute numbers of properties that are exiting the rental market.

Landlords are leaving the sector because unless they have model tenants (and a majority of tenants are model tenants)- they are screwed. It only takes one tenant who decides to play the system- to convince any given landlord to get the hell out of the sector- and when it still takes over two years to evict a non-paying tenant who destroys a property and is antisocial towards both neighbours and the landlord themselves- the writing really is on the wall.

The entire system is setup to protect tenants at all costs- the level of rents- is a serious issue- however, its a factor of a shortage in the sector- a shortage that is worsening- as landlords rush to get the hell out of the sector.

We critically need supply- where people want to live- and no more wonderful reports from the Minister- and bizarre stats and wholly dreamt up promises- that he has no means of delivering on (and that he doubtless will attack whatever poor fool gets to be Minister of Housing in the next Dáil over...........)

We are fed up of soundbites- and using landlords as scapegoats- has had the effect of simply persuading hoardes of them to leave the sector- pretty much all the meddling the government does, has been subject to the law of unintended consequences.

The fact of the matter is- it really doesn't matter how the Minister tinkers with taxation of rental income- when a landlord cannot evict a tenant who is antisocial, destructive or stops paying their rent- landlords are going to leave the sector- and honestly- why wouldn't they- you'd have to be bonkers to hang around for more abuse.

The current system is irretrievably broken- and the repeated government interference simply makes things worse.

I honestly think the only sane thing a landlord can do in the current environment- is try to get the hell out of the sector in as orderly a fashion as possible.

Sleeper12

The Student wrote:

The govt needed people to purchase property to get cash moving in the economy. They did not offer incentives to benefit the landlord. It was done for the govts own reason.

That's not entirely true. There was an incentive in the late 80s & early 90s. For the life of me I can't remember what it was. It was something like a section 7 investment. Name is not right but it is close. It was aimed totally at investors & only covered certain run down areas. There were huge tax breaks for the first seven years. It was a good scheme and kick started investments in run down areas of Dublin City, I think including Temple Bar, the quays and the docklands

ouxbbkqtswdfaw

Section23, only problem was the break was built into the cost of the property.

DubCount

Small landlords are leaving the market (as shown in RTB figures). We already have a shortage of long term rental property, so landlords leaving the market is making that shortage worse. Institutional landlords are not filling the gap and (rightly or wrongly) the government does not want to get involved in direct social housing provision. That leaves a tough question - how to you get more long term rental properties and more landlords? Most of the solutions are unpopular - higher rents, lower standards, or reduce tenants rights. That leaves tax breaks as an option.

Tax breaks for certain sectors are not uncommon to influence investors. Film schemes, urban renewal schemes, forestry, artists exemptions, BES - there's a long list. Unfortunately, until the government tackles the time and cost of valid evictions, especially in rent arrears cases, tax incentives will not stop the outflow of landlords.

The Student

Sleeper12 wrote: »

That's not entirely true. There was an incentive in the late 80s & early 90s. For the life of me I can't remember what it was. It was something like a section 7 investment. Name is not right but it is close. It was aimed totally at investors & only covered certain run down areas. There were huge tax breaks for the first seven years. It was a good scheme and kick started investments in run down areas of Dublin City, I think including Temple Bar, the quays and the docklands

On the above the incentive given was to benefit the govt. The landlord takes the risk. The govt does not want the responsibility of providing houses for people. They need landlords whether they like it or not. If they don't stop the rental properties going on the sales market is just going to get worse and worse.

Sleeper12

7axthys24v35jl wrote:

Section23, only problem was the break was built into the cost of the property.

Section 23. Thanks for that. On the tip of my tongue but could quite get it.

It was a great scheme and kick started our economy. Everyone was a winner with it

The_Conductor

Is it an incentive though- when the vast bulk of the incentive is built into the initial purchase price of the property?
The main beneficiary of many of these S7, S22, S23 etc schemes- were the developers and the original owners of the property that was being developed- not a subsequent purchaser.

The current proposal- which is phrased as a method of levelling the playing field between small scale landlords who shoulder an unfair taxation burden- and large scale landlords and REITs- who simply are bending the rules to their bidding and in many cases getting away without paying tax, period, is myopic and is looking solely at one inequity in the system. The other obvious inequity- is the manner in which even the local authorities are actively encouraging tenants who have ceased to pay their rent to overhold.

The regulatory regime is toxic, plain and simple. It doesn't work. Lobbing a tax incentive at small landlords might encourage a few who are sitting on the fence not to divest just yet- but just wait until they get an antisocial tenant- or one who decides paying their rent is optional- and regardless of how attractive the tax incentive is- they are marching to the door.............

The current system is broken. Tinkering it isn't going to fix it. We need a new system. Until such time as we have a working system- landlords are going to keep leaving the sector- and indeed, they'd be stark raving lunatics not to.

I don't know what the answer is- I would suggest mirroring the likes of the system in Germany or Switzerland- as closely as possible (including making letting unfurnished property the norm- and allowing tenants to paint property to their hearts content- as long as they return the property as found to the landlord)- is the way to go. There has to be a quid-pro-quo- if a tenant is to stay long term in a property- they should be able to decorate to their taste- and furnish to their taste- but on the ending of the tenancy- they should return the property promptly and as found- and it should be inspected by an independent assessor on the day- and reasonable deductions made for any transgressions from requirements..............

The UK and Irish rental markets- are anamolies- not the norm- and now that we've irretrievably broken the Irish model- we should come up with something that will actually work long term and that everyone can live with............

Phoebas

Not to be pedantic or anything but the thread title is very misleading.

1. This is just a proposal.
2. It's a FF proposal, not a government one.

Sleeper12

DubCount wrote:

Small landlords are leaving the market (as shown in RTB figures). We already have a shortage of long term rental property, so landlords leaving the market is making that shortage worse. Institutional landlords are not filling the gap and (rightly or wrongly) the government does not want to get involved in direct social housing provision. That leaves a tough question - how to you get more long term rental properties and more landlords? Most of the solutions are unpopular - higher rents, lower standards, or reduce tenants rights. That leaves tax breaks as an option.

Small landlords are leaving the market but not necessarily by selling up. A huge amount of small landlords in Dublin have gone down the Airbnb route. This growth has contributed to the housing shortage by taking homes out of the market all together

The_Conductor

Phoebas wrote: »

Not to be pedantic or anything but the thread title is very misleading.

1. This is just a proposal.
2. It's a FF proposal, not a government one.

Its an item on their list of demands to continue supporting the government until 2020........... Its as good as a government proposal.

The Student

Sleeper12 wrote: »

Small landlords are leaving the market but not necessarily by selling up. A huge amount of small landlords in Dublin have gone down the Airbnb route. This growth has contributed to the housing shortage by taking homes out of the market all together

That might be the case in central Dublin but its not the case where I am. I am in Dublin and the houses selling in my area are selling for 350 - 380k. I am on the red luas line in a very nice area which would rent no problem.

boege

My son was seeking a room to rent in Dublin and was helping him to find a place. Some observations:

He took a month to find a room to rent. Apparently this is fast and it takes two months on average.

He sent off over 60 inquiries on rent.ie and did about 15 visits. In more than half the cases he was 'interviewed' by the landlord. In only half of these was the landlord also living.

One LL advised him that he would receive over 15 inquiries to a rent.ie advert in the first hour. Once he had about 10 visits lined up he would stop responding to any further inquiries.

He got only one offer out of the 15 visits. He did not take it as it €880/month in a very average house off Griffith avenue.

5 day rental is very common and no longer targeted exclusively at students. Rumour is that the weekends are used on AirBnB but I don't have evidence to verify this.

Room shares are also now commonly advertised. One advert was for a bed in room already occupied by two people.

I went up to help him move last weekend and checked AirBnB. Dublin city (not centre) was 98% booked out. I did not fancy what was left, so took a townhouse b&b in Ballsbridge. Hotel prices were mental. (€160+)

Hostels were largely full this week, I had to check them out early last week as my son was running out of options.

Good news is he got somewhere (through a contact) a day before house notice period was up. (Don't mention previous LL)

It does not take a lot to see that Dublin is hopelessly short of accommodation of all types. The problem is being exaggerated by the influx of people into the city (I believe over 50,000 in 2017).

I am (an accidental) LL outside Dublin but I don't see how these proposals will build one new property. I don't think there is a simple answer here but all the current measures have done is stimulate dysfunctional behavior in the market.

helimachoptor

I've got a property rented to the council.

Onto the 2nd contract now, which will put the house at the halfway point of the mortgage when it finishes. We've had the same tenants (they rented our house privately before the switch to the council). But regardless of tenants, council will still pay rent, but tenants are from the area and keen to stay.

This would be a big benefit (assuming there's a half decent tax break).

Sleeper12

boege wrote:

I am (an accidental) LL outside Dublin but I don't see how these proposals will build one new property. I don't think there is a simple answer here but all the current measures have done is stimulate dysfunctional behavior in the market.

They are not intended to get new builds. The new proposal is to use existing property for longer letting. Shorter lettings =more rent increases outside of the law. If you have a tenant on a 10 year lease you will have to stick with the legal rent increase.

New proposals are to keep rent increase in check and provide security for long term tenants

jimmycrackcorm

Amirani wrote:

Rental income should absolutely not be made tax free, that would be a massively unfair tax break. Why is income earned from property investment more deserving of tax free status than income earned from labour or from other investments?

One of my siblings has just bought an investment property and is going to Airbnb it for ten days a month. What's the incentive to rent it on a long term lease instead when Airbnb is better than the risk of a bad tenant.

hmmm

I wish we'd stop incentivising small landlords. Most of them haven't a clue about any regulation, and many of them don't care, and they make life a misery for tenants and people who own property in the neighbourhood. Let professional investors build our rental stock, let them charge a fair price and run their complex professionally.

the_syco

It comes down to the question; will the landlord be on their own should the tenant stop paying?

If yes, the tax break will mean nothing to those leaving the market.

the_syco

hmmm wrote: »

Let professional investors build our rental stock, let them charge a fair price and run their complex professionally.

REITs will charge as much as they can, won't entertain sob stories, and evict you if you feck up even just once.

boege

Sleeper12 wrote: »

They are not intended to get new builds. The new proposal is to use existing property for longer letting. Shorter lettings =more rent increases outside of the law. If you have a tenant on a 10 year lease you will have to stick with the legal rent increase.

New proposals are to keep rent increase in check and provide security for long term tenants

Your probably right but its not what is happening - in fact my experience is that the opposite is what is happening.

Fol20

This would be a logistical nightmare to enforce and what would you need to do. Leases have very little bearing for tenants. They can sign a 5year contract and 2 months in they can just decide to leave. On top of it tenants are already locked in for a number years through the tenancy act anyway so what difference does having a long term lease make? It’s a spin as always to make it seem like the government are giving something good to tenants in the form of more security which they already have through the residential tenancy act along with giving landlords something as well. I’m very biased in this however what I would like to see is some of the following:

1. 14000 tax free rental profit similar to rent a room so it’s on a level playing field for the small guy.

2. The ability to expense lpt, flat rate expense of diesel per property.flat rate also for phone bill.

3. Make the taxation of usc and standard rates the same so that all of the capital and current expenses can be deducted before taxation

4. Equality and speed when dealing with disputes which can actually be enforceable.

I think if they had these. Most landlords would be happy.

The Student

Fol20 wrote: »

This would be a logistical nightmare to enforce and what would you need to do. Leases have very little bearing for tenants. They can sign a 5year contract and 2 months in they can just decide to leave. On top of it tenants are already locked in for a number years through the tenancy act anyway so what difference does having a long term lease make? It’s a spin as always to make it seem like the government are giving something good to tenants in the form of more security which they already have through the residential tenancy act along with giving landlords something as well. I’m very biased in this however what I would like to see is some of the following:

1. 14000 tax free rental profit similar to rent a room so it’s on a level playing field for the small guy.

2. The ability to expense lpt, flat rate expense of diesel per property.flat rate also for phone bill.

3. Make the taxation of usc and standard rates the same so that all of the capital and current expenses can be deducted before taxation

4. Equality and speed when dealing with disputes which can actually be enforceable.

I think if they had these. Most landlords would be happy.

I agree extending the rent a room scheme should be extended but I doubt the govt will do so. Remember income tax from private (non institutional) landlords is quite significant and the govt will not want to forgo that.

By offering tax breaks for 5 yr and 10 yr leases all the govt have done is kick the can down the road. IE a landlord wont see the tax credit until yr 5 or yr 10 after the lease terms have been met.

I personally would not hold my breath on anything meaningful from the govt for landlords in the budget.

Supply of rental property is going to continually decline unless the govt actually give something meaningful to the landlords (not just tax breaks but also a quicker and more cost effective eviction process).

ouxbbkqtswdfaw

the_syco wrote:

REITs will charge as much as they can, won't entertain sob stories, and evict you if you feck up even just once.

Can REITS evict a bad tenant, or do they have to go through the drawn out RTB process?

The_Conductor

7axthys24v35jl wrote: »

Can REITS evict a bad tenant, or do they have to go through the drawn out RTB process?

They are subject to the same process as any landlord- they are however also in a position to twist the law within an inch of its life- for example, they tend to own the entire development- and cables and water do unfortunately get cut from time to time- or utility workers refused access to the complex, or cars clamped, security codes changed etc etc

Its a lot easier to manage a block of tenants- than it is a house here, a flat there. This is also why REITs don't buy individual properties- managing them would be a logistical nightmare- and they'd have the self same issues that small scale landlords have- which they can mitigate when they own the entire development..............

the_syco

The Student wrote: »

By offering tax breaks for 5 yr and 10 yr leases all the govt have done is kick the can down the road. IE a landlord wont see the tax credit until yr 5 or yr 10 after the lease terms have been met.

The 10 year thing sounds like what they currently do with the 10 year HAP lease, of "allowing property owners to claim 100% relief on their mortgage interest, as an expense against rental income". Which in reality doesn't really work, as does the 10 year lease still allow eviction for all the usual reasons? Or is this now a 10 year lease trying to be pushed over the current 6 year lease, but with a carrot approach?

7axthys24v35jl wrote: »

Can REITS evict a bad tenant, or do they have to go through the drawn out RTB process?

RTB process. But whilst landlords may let them stay if the tenant has been a good tenant for the past 6 years, and this is the first issue, to REITs you're now a problem. And they'll issue the notice to pay up, and if that's not met, the eviction notice. And whereas the landlord may not have the money to hire out a sheriff after this, the REITs will.

Oh, and they can do maintenance in the apartments next to them, under or above them, or in the hall outside them. The moment that they're evicted, their fobs can cease to work, so they can't access the building. They can still access their apartment, just not the building.

The Student

the_syco wrote: »

The 10 year thing sounds like what they currently do with the 10 year HAP lease, of "allowing property owners to claim 100% relief on their mortgage interest, as an expense against rental income". Which in reality doesn't really work, as does the 10 year lease still allow eviction for all the usual reasons? Or is this now a 10 year lease trying to be pushed over the current 6 year lease, but with a carrot approach?

.

I don't know what they are planning be honest. I have my doubts it will be anything worthwhile. The easiest is to extend the rent a room scheme. I cant see any other way to offer any real incentives without either a lot of admin work or having safeguards built in. With the extension of the rent a room scheme there is no admin work for the govt to administer the scheme.

What if I as a landlord signed a five lease with a tenant to avail of the tax break and the tenant for whatever reason decided to leave during the agreement. I miss out on the tax break through no fault of my own because the tenant was not there for five yrs.

I am at a loss as to why the Govt don't actually talk to Landlords and ask them how to resolve the issue. Maybe the Govt are finally realizing they actually need us and should work with us rather than against us.

ted1

Do the government not know about part 4?

After 6 months the tenant effectively has a 6 year lease

Marcusm

Given that the real pressure on government relates to social housing and “emergency” housing, a media savvy government would introduce a significant benefit for a 10 year CoCo or HAP type lease. Two birds, one stone and limits the benefit given rental levels.

Graham

ted1 wrote: »

Do the government not know about part 4?

After 6 months the tenant effectively has a 6 year lease

Unless the landlord wants to sell
or substantially refurbish
or occupy it themseves
or pass it to a family member

I suspect any tax incentives will be accompanied by the loss of some or all of those rights on the part of the landlord.

Baby01032012

But the minister has stated that landlords would still maintain the right to sell so I’d imagine there would be limited break clause.

I guess there would be something between the very limited current tax break for letting to social welfare tenants where landlord gets relief on 100% mortgage interest but much less than the section 23 of the 1990s that saw house prices in very rural areas hyperinflated solely based on the break to write majority of the build cost off against all rental income. However this then meant you couldn’t right the subsequent loss off against other capital gains for CGT.

Fol20

The Student wrote: »

I don't know what they are planning be honest. I have my doubts it will be anything worthwhile. The easiest is to extend the rent a room scheme. I cant see any other way to offer any real incentives without either a lot of admin work or having safeguards built in. With the extension of the rent a room scheme there is no admin work for the govt to administer the scheme.

What if I as a landlord signed a five lease with a tenant to avail of the tax break and the tenant for whatever reason decided to leave during the agreement. I miss out on the tax break through no fault of my own because the tenant was not there for five yrs.

I am at a loss as to why the Govt don't actually talk to Landlords and ask them how to resolve the issue. Maybe the Govt are finally realizing they actually need us and should work with us rather than against us.

I’d like to think that but I highly doubt it. More than likely they need to spin it so it seems like they are doing something for both sides yet doing very little or making it worse for both at the same time. They should get some realistic people from both sides of the fence into one room and mediate what can be done from a realistic sense and at the same time help out both sides

LotharIngum

The two biggest problems as I see it are.

1 so many landlords stuck on below market rents and cant afford to maintain property on what they are getting.
2 Tenants can screw over a landlord like there is no tomorrow, with absolutely no sanction.


Those are the biggest reasons landlords are getting out. Along with many other reasons not so big.